Using Credit Cards for Overseas Travel
Now that the recession is leveling off, many people are getting ready to start using their credit cards again. Because the economy is projected to reach its turnaround point mid-summer, consumers are looking to use their cards to pay for summer vacations.
Marilyn Dean of Los Angeles, California stated, “We haven’t had a real vacation in two years…the first year we just opted not to go but the second year the recession hit us hard and we couldn’t.” Like many other Americans, Dean is planning for a year of normalcy, and that includes a well-deserved vacation.
Paying for vacations
When it comes to paying for vacations, many Americans are looking to their credit cards. Anne Banas, editor of SmarterTravel.com, stated, “It’s pretty much the best way to make a purchase, especially your big items. It’s just really easy. And you don’t lose much in the exchange.”
Some consumers are worried about exchange rates, however, those are secure. Both Visa and MasterCard secure money based on “wholesale rates offered to large banks and corporations,” instead of the retail rates most customers are charged. Every time Americans use a credit card for an overseas purchase, they are guaranteed an excellent exchange rate.
Stiff fees for overseas purchases
Although the exchange rate is taken care of if a consumer pays with credit cards, there are other things to be aware of when traveling. Fees can crop up quickly with any overseas purchase. Most banks charge a “currency conversion fee” when their customers purchase items outside the US. This fees can range anywhere from 1% to 3% of the purchase price. Consumers should do some advance planning and call their credit card companies to find out what the fees for foreign conversion are.
A recent study by Bankrate.com showed that Capital One was the only card company that did not pass the conversion fee on to their customers. If you know you’re going on vacation in a few months, it may benefit you to open a credit card account that has no conversion fees and use it solely for travel.
Over-the-top fees for cash advances
Taking out cash advances on credit cards is a huge budget-breaker. Interest rates on cash withdrawals often exceed 20%, and that interest begins accruing from the minute the money is withdrawn. David Lytle, editor of Frommers.com, stated, “The rates on those things are awful. It’s the worst way to get money.”
Hidden fees for debit card withdrawals
When traveling abroad, the best way to get money is to use a local ATM and a debit card. A debit cards is linked directly to the cardholder’s account, so it deducts funds automatically. Consumers should be aware, however, that some banks charge anywhere from $2 to $5 for each withdrawal from an ATM outside their network. It’s also possible for some banks to charge 2 to 3% of the amount withdrawn with a debit card at an ATM.
Consumers need to understand the fees and policies of their banks before they travel abroad, and if they find a bank that offers a better deal it may be wise to open a special travel account. With some careful research and planning, paying for an overseas vacation really can be worry-free.